In the ongoing national debate in the United States about the spiraling price tag for health care, drug costs have received the lion’s share of attention. But there’s another culprit lurking that will soon attract government and business scrutiny as pressure builds to control spending: the cost of medical technology.
| Medical technology spending comprised about 20 percent of the growth in health-care costs for the last five years, and now exceeds $200 billion annually. |
Although the benefits of innovative medical technologies are undeniable (for example, advances have cut the death rate from cardiovascular disease by 25 percent over the last 20 years), innovation comes with a price. Overall health-care costs have outpaced GNP growth by more than four percentage points, on average, in the last five years and now total $1.5 trillion per year. Spending on medical technology has accounted for about 20 percent of that growth, and now exceeds $200 billion per year. This spending surge presents a challenge to the U.S. economy and society: How can we control cost increases without sacrificing the benefits of innovation?
Three Cost Drivers
There is substantial evidence that overutilization and misuse of technology leads to spending that exceeds its value for patients. In the diagnostic imaging technology category — which has grown to nearly a $100 billion business — spending increases are driven to a large extent by the growth in the number of machines installed in hospitals, as well as in doctors’ offices and at imaging centers. This has led in turn to overcapacity in many areas and has created incentives for doctors to prescribe unnecessary procedures. Duplication of procedures (i.e., a patient receives an MRI, then a PET scan, even though doing both procedures does not help doctors get closer to a diagnosis) and overuse of high-end procedures in situations where they add little value has also driven up technology spending unnecessarily.
| Private medical insurers are likely to look for ways to reduce costs without hindering innovation. |
Options for Change
Private medical insurers and companies that pay for health-care plans have started to realize the significant impact of medical technology on health-care costs, and are likely to look for ways to reduce costs without hindering innovation. In principle, given continued third-party payment for health care, there are two options: One is to force a national debate about ways to introduce consistent and generally accepted value calculations into the evaluation of new technologies; the other is to look for targeted strategies that reduce costs in specific areas of the health-care system.
